Managerial Ownership and Financial Analysts’ Information Environment

Abstract

Despite the importance of sell-side financial analysts as information intermediaries in the capital market, little is known about how managerial equity ownership associates with their information environment. Using Barron, Kim, Lim and Stevens’ (1998) framework of measuring information precision, we observe that managerial ownership is positively associated with financial analysts’ public and private information precisions, largely consistent with the alignment view of managerial equity ownership. These results are robust to controlling for various economic and statistical factors that might affect the inference.

Keywords: Managerial Ownership, Information Environment, Incentive Alignment, Information Precision

JEL Classification: M40, M41, O16